Case BriefsSupreme Court

Supreme Court: The Division Bench of Dinesh Maheshwari* and Aniruddha Bose, JJ., held that in cases disclosing deliberate defiance and elective non-performance on the part of the tenant, the consequence of law remains inevitable, that the defence of such a defendant would be struck off.

Reversing the impugned order of the Allahabad High Court, the Court expressed,

“In the context of the proposition of denial of relationship of landlord and tenant between the plaintiff and defendant, such a denial simpliciter does not and cannot absolve the tenant of liability to deposit the due rent/damages for use and occupation, unless he could show having made such payment in a lawful and bonafide manner.”

Background

The instant appeal deals with procedural technicalities of Order XV Rule 5 CPC which arose in a suit for eviction and recovery of arrears of rent as also damages for use and occupation.

The plaintiff-appellant contended that she is the owner of the suit shop as she had purchased it from its erstwhile owner by sale deed dated 10-05-2010 and that the defendant-respondent is a tenant since the time of its erstwhile owner. She alleged that the respondent is a chronic defaulter in payment of rent and taxes; and despite information of the sale deed and despite demand made by her, the rent along with taxes had not been paid to her since the month of May 2010.

On the contrary, the respondent denied the relationship of landlord and tenant between the plaintiff and himself. Though he did not deny his status as tenant in
the suit shop, the defendant asserted that the alleged sale deed dated is illegal and void.

In Issue

The plaintiff-appellant had filed an application under Order XV Rule 5 CPC, praying that the defence of the defendant-respondent be struck off, since he had not deposited any rent and no evidence was adduced by him to establish any payment of rent. Contesting the application, the defendant-respondent contended that the provisions of Order XV Rule 5 CPC are applicable only to a case where there is admission as to landlord-tenant relationship; however, in the present case, he had clearly averred that there was no relationship of landlord and tenant between the plaintiff and defendant.

Contrary Findings of the Courts Below

The Trial Court stroke off the defence of the defendant-respondent for failure to pay or deposit the due rent, holding that even if the tenant denied the relationship of landlord and tenant, the application under Order XV Rule 5 CPC was maintainable. The order of the Trial Court was affirmed by the Revisional Court.

However, in appeal, the High Court reversed the order of the Trial Court by holding that even though the defendant-respondent did not pay his dues, he was entitled to some indulgence.

Observations and Analysis

Order XV Rule 5: Legislative Intent and Judicial Pronouncements

As Order XV Rule 5 CPC, the consequence of default in making deposits is that the Court may strike off the tenant’s defence. However, before making an order striking off defence, the Court is to consider the representation of the defendant, if made within 10 days of the first hearing or within 10 days of the expiry of one week from the date of accrual of monthly amount.

The Court, after considering various judicial pronouncements in this regard, including Santosh Mehta v. Om Prakash, (1980) 3 SCC 610 and Kamla Devi v. Vasdev, (1995) 1 SCC 356, held that the sum and substance of the matter is that the power to strike off defence is discretionary, which is to be exercised with circumspection but, relaxation is reserved for a bonafide tenant and not as a matter of course. The Court expressed,

“The common thread running through the aforesaid decisions of this Court is that the power to strike off the defence is held to be a matter of discretion where, despite default, defence may not be struck off, for some good and adequate reason.”

Elaborating on the question of good and adequate reason, the Court stated that that would directly relate with such facts, factors and circumstances where full and punctual compliance had not been made for any bonafide cause, as contradistinguished from an approach of defiance or volitional/elective non-performance.

Factual Analysis

The Court noted that the first part of sub-rule (1) of Rule 5 of Order XV CPC requires deposit of the admitted due amount of rent together with interest, the second part thereof mandates that whether or not the tenant admits the amount to be due, he has to, throughout the continuation of the suit, regularly deposit monthly amount due within a week from the date of its accrual. Hence, the Court remarked,

“We are not inclined to accept that in every case of denial of relationship of landlord and tenant, the defendant in suit for eviction and recovery of rent/damages could enjoy holidays as regards payment of rent.”

The Court opined that by merely denying the title of plaintiff or relationship of landlord-tenant/lessor-lessee, a defendant of the suit of the present nature cannot enjoy the property during the pendency of the suit without depositing the rent/damages.

Observing that the defendant-respondent, by his assertions and conduct, has left nothing to doubt that he has been steadfast in not making payment of rent/damages, despite being lessee of the suit shop, the Court held that his conduct amounted to volitional non-performance and defiance.

Hence, the Court held that there was no reason for the High Court to have interfered in the concurrent findings of lower Courts. The Court remarked,

“We find it rather intriguing that, despite having not found any cogent reason for which discretion under Rule 5 of Order XV CPC could have been exercised in favour of the defendant-respondent, the High Court, in the last line of paragraph 45 of the order impugned, abruptly stated its conclusion that: ‘yet the defendant/tenant deserves some indulgence’.”

Effects of Subsequent Deposits Pursuant to Impugned Order

Regarding the submissions of the defendant-respondent that he had deposited the due rent from 10-05-2010 to 10-11-2018 and he had been further making regular deposits, the Court held that such deposits made only pursuant to the order of the High Court cannot wipe out the default already committed by him.

The Court said that the deposits belatedly made, pursuant only to the unsustainable order of the High Court, do not ensure to the benefit of the defendant-respondent.

Conclusion

In the light of the above, the impugned order of the High Court was set aside and the order of the Trial Court was restored. The Trial Court was directed to take note of the fact that the suit filed way back in the year 2011 is still pending therefore, the same should be assigned reasonable priority for expeditious disposal.

[Asha Rani Gupta v. Vineet Kumar, 2022 SCC OnLine SC 829, decided on 11-07-2022]


*Judgment by: Justice Dinesh Maheshwari

Kamini Sharma, Editorial Assistant has put this report together.

Delhi High Court
Case BriefsHigh Courts

   

Delhi High Court: In a case where the Trial Court directed the tenants ‘appellants herein' to pay the defaults in rent, which was due in COVID, the Division Bench of Saurabh Banerjee, and Suresh Kumar Kait, JJ. upheld the same as the tenants willingly chose to retain the possession of the premises and as there was no clause in the Lease Deed giving any suspension, thus, the appellant was bound to pay the monthly charges to the landlord in terms of the clear stipulations contained in the Lease Deed.

Facts

The respondent-landlord had given the said premises on lease to the appellant-tenants to carry out authorized commercial activity like running a spa or any other activity vide a registered Lease Deed dated 18-12-2010 (‘Lease Deed') for a period of 15 years, commencing from 15-05-2010 to 14-05-2025. During the subsistence of the aforesaid Lease Deed, COVID-19 pandemic spread across India and the lockdown prevailed from March, 2020 for the ensuing months, thus resulting in non-payment of rent.

The respondent issued legal notice(s) on 20-04-2020, 11-05-2020 and 28-05-2020 for payment of rent, even offering suspension of payment for 60 days on compassionate grounds which went unanswered. The tenants, however, continued to stay on the premises till termination of the Lease Deed which was was thereby terminated vide notice 07-06-2020. A reply was sent to the landlord denying the liability by taking plea of force majeure as per Clause 14 of the Deed.

Issue

An application under Order XIII A Civil Procedure Code, 1908 (‘CPC') r/w Section 151, CPC read with Section 3 Commercial Courts Act, 2015 ‘Order XIII A application' was filed by the landlord which was decreed in favour of them. Being aggrieved, the appellant challenged the impugned judgement on three basic grounds.

1. The Trial court had overlooked the fact that the premises was ‘unfit to use' alleging thereby that because of the then prevailing lockdown situation during the period in dispute and passing of different circular(s) issued by various Government(s) from time to time the appellant was unable to carry on the activity of running a Spa from the said premises.

2. The Trial Court had wrongly applied the provision of Section 108(e) of the Transfer of Property Act, 1882 even though the parties were admittedly bound by the terms of the Lease Deed executed inter-se and that the Transfer of Property Act, 1882 was not applicable to the facts and circumstances of the case.

3. As there was no commercial use of the premises permissible and/ or possible during the aforesaid period in the dispute before the learned trial court, the respondent was not entitled to rent for the said period.

What is Order XIII A CPC?

The Court noted that the said provision of Order XIII A was introduced in the CPC by way of an amendment in the year 2015 with respect to all kinds of commercial disputes only. The said Order XIII A, CPC is a provision enabling the courts to take up and decide claim(s) in the commercial disputes without recording oral evidence, i.e., without following the ordinary procedure to be adopted and followed in an ordinary suit. Two fundamental grounds which have to be satisfied while deciding an Order XIII A application are that a party has to show that the other party has no real prospect of succeeding in and/ or defending the claim and that there is no other compelling reason as to why the claim should not be disposed of before commencement of trial, i.e., recording of oral evidence.

Observation and Analysis

The Court noted that on a careful analysis, it emerges that the provision of Order XIII A, CPC has been specifically introduced by the Legislature so as to adjudicate and decide the issue(s) at the threshold itself without proceeding to the unnecessary rigors of a prolongated trial and to save time, effort and money by making it more convenient and expeditious for all concerned, be it the court(s) and/ or the parties involved. Furthermore, an Order XIII A application can be allowed, and a court can proceed to pass a summary judgment if a party has a real prospect of succeeding and/ or defending in the claim and there is no real purpose of proceeding to trial, i.e., recording oral evidence.

The Court further noted that the appellant is merely trying to reagitate the same issues in the form of grounds which have all been heard, taken note of and decided by the Trial Court in the impugned judgment, by simply giving a different flavour to them.

The Court observed that there clearly exists a relationship of respondent-landlord and the appellant-tenant and they are bound by terms of Lease Deed. Since the appellant neither chose to exercise his right to terminate the Deed nor chose to vacate the said premises until termination, thus, there is no such clause in the Deed to claim non-payment of rent. Thus, the appellant was well and truly liable to pay the lease rentals as per the Lease Deed along with interest thereon for the period in issue.

On the issue of the premises being unfit for use due to COVID and the then prevailing lockdown, the Court opined that the premises were always fit to use, and the appellant was free to carry on any kind of commercial activity barring running a Spa. The Court premised this on a well settled law that temporary non-use of premises during the lock down period cannot be construed as rendering either the stipulated term of the Lease Deed void or giving any benefit to the tenant to claim suspension of rent on the ground of mere non-use thereof.

Decision

The Court remarking that Section 108(e) of The Transfer of Property Act, 1882 is inapplicable to the facts of the instant case, held, as the appellant willingly chose to retain the possession of the premises and as there was no clause giving any respite to it, the appellant was bound to pay the monthly charges to the respondent in terms of the clear stipulations contained in the Lease Deed.

[Siddhatha Singh v. Ajit Singh Bawa, 2022 SCC OnLine Del 2007, decided on 12-07-2022]


Advocates who appeared in this case :

Mr. Harsh Gokhale, Advocate, for the Appellant.


*Arunima Bose, Editorial Assistant has reported this brief.

Jammu & Kashmir and Ladakh High Court
Case BriefsHigh Courts

Jammu & Kashmir and Ladakh High Court: While deciding the instant petition filed by 3 retired State Bank of India employees, who had retained their respective government accommodations and were aggrieved with the rent being charged at commercial rate; the bench of Sindhu Sharma, J., dismissed the petition on the ground that the petitioners do not have any indefeasible right for allotment of government accommodation. The government accommodation is meant for serving officers and not retirees.

Facts of the case: The petitioners, while they were in service of the State Bank of India, were allotted residential accommodation in the SBI Officers’ Flats situated in Jammu, at nominal monthly rents. Post retirement, upon the petitioners’ retention of the accommodation, the Bank started charging rent at commercial rate from their pension accounts. Aggrieved by this deduction, the petitioners came to the Court.

Contentions:

  • Claiming the charging of rent at commercial rate as illegal, the petitioners submitted that they are migrants and have suffered the calamity which struck in 1990, due to which the Kashmiri Pandits migrated from the Kashmir Valley to Jammu and various other States. Due to disturbances in the valley, many State and Central Government Employees migrated from Kashmir Valley to Jammu including the petitioners. The petitioners were registered as migrants and were also issued migrant ration cards by the State Government. The State as well as the Central Government have allotted residential accommodation to those migrant employees, who were forced to leave Kashmir Valley by abandoning their moveable and immovable property.

  • It was further contended by the petitioners that given their current position, the findings of the Supreme Court in J.L. Koul v. State of J&K, (2010) 1 SCC 371 apply to them as they are similarly situated as the petitioners in afore-mentioned case. The petitioners stated that they are migrants from Kashmir and, therefore fully entitled to reside in the residential accommodations provided to them by the Bank.

  • The petitioner also submitted that they have no other residential accommodation in Jammu, thus they have no other choice than to reside in their allotted residence.

  • It was also contended that the charging of commercial rate of rent by the Bank which was forcibly debited from the petitioners’ pension accounts, is bad, arbitrary and should be set aside. to be set aside. The illegal deduction of rent at commercial rates from the petitioners, who are retired officials and have been provided accommodation on account of them being migrants, is discriminatory and violative of Art. 14 of the Constitution.

Per contra, the respondents put forth the following contentions-

  • It was argued that the petitioners cannot invoke the extraordinary jurisdiction of this Court as they have not approached with “clean hands”. The respondents pointed out that the petitioners are owners of their respective flats in places like Delhi and Mohali.

  • It was also submitted that the flats were allotted to the petitioners as they were employees of the Bank. It was contended that as per the Bank policy highlighted in clause 19.11.1 of the HR Handbook, Volume 1 issued by the Home Resources Department, SBI; the officers may retain the accommodation up to the maximum period of two months from the date of normal retirement without any approval. Any retention beyond the permitted period would be dealt with as per instructions like recovery of commercial rent.

  • The respondents submitted that the petitioners’ reliance on J.L. Koul case is misplaced, as they were not allotted the accommodation on the basis of their being migrants from the Valley rather the accommodation was allotted to them by virtue of their being serving employees of the Bank on nominal license fee.

Observations and Decision: Perusing the facts and the contentions submitted by the parties, the Court noted that the issue of retention of government accommodation by Kashmiri migrant employees was considered in Union of India v. Omkar Nath Dhar, (2022) 1 SCC 40, wherein the Supreme Court held that Kashmiri migrants, who were once Government employees, cannot retain Government accommodation for indefinite period on the ground that “they would return to the Valley when the situation will improve”.

Applying the ratio of the above-mentioned case on the facts of the instant petition, the Court decided that petitioners have concealed material facts from the Court and upon revelation of those facts, the petitioners cannot be said to have enforced their right to shelter, since they already have an alternate accommodation.

The petitioners were directed to vacate their respective government accommodations. However, since they were retired employees, 30 days’ time was granted to them in order to vacate and handover the possession of the flats to the respondents-authorities.

[Indar Krishan Raina v. Union of India, 2022 SCC OnLine J&K 477, decided on 03-06-2022]


Advocates who appeared in this case :

Sunil Sethi and Navyug Sethi, Advocate, for the petitioners;

Sumeet Bhatia, Advocate, for the respondents;


*Sucheta Sarkar, Editorial Assistant has reported this brief.

Akaant MittalExperts Corner


A. Introduction


The IB Code differentiates between financial creditors and operational creditors. Financial creditors are those having a relationship with the corporate debtor that is purely a financial contract, such as a loan or a debt security. Whereas, operational creditors are those who have due from the debtor on account of transactions made for the operational working of the debtor.[1]

 

For the purposes of the definition of the term “goods”, the Sale of Goods Act, 1930 can be referred to; whereas, the definition of the term “services” is still not concretely defined. A claim on operational debt may be on account of breach of an agreement or a decree of a court of law; still the same must relate to the supply of goods and services.

 

Now issue arises as to the status of lease dues forming an “operational debt”. The question has two aspects, namely, one whether the landlord could claim to be an operational creditor against the tenant for the rental dues outstanding; and two whether a tenant while using the tenanted premise, if suffers any damages, could claim to be an operational creditor.

 


B. Landlord claiming to be an Operational Creditor


The Bankruptcy Law Reforms Committee Report that formed the basis of the IB Code illustratively suggested that the definitions of “operational creditor” and “operational debt” include wholesale vendors of spare parts whose spark plugs are kept in inventory by the car mechanic and who gets paid only after the spark plugs are sold, thus making them operational creditors. Similarly, the lessor who rents out space to an entity is an operational creditor to whom the entity owes monthly rent on a three-year lease.[2] Operational creditors, in other words, maybe employees, rental obligations, utilities payments and trade credit.[3]

 

While the landlord certainly could claim to be an operational debtor in light of what the Bankruptcy Law Reforms Committee seems to suggest, however, in Annapurna Infrastructure (P) Ltd. v. SORIL Infra Resources Ltd.[4], such an issue was left open by the NCLAT to be decided by the NCLT. In this case, the landlord had initiated proceedings under Section 9 against the tenant on the basis of an arbitral award which awarded rent due towards the landlord on the part of the tenant. The NCLAT, however, left this contention unaddressed and remitted the matter on other grounds.

 

In Sarla Tantia v. Nadia Health Care (P) Ltd.,[5] the question before the NCLT was whether the recovery of arrears of rent can be claimed as operational debt within the meaning of Section 5(21) of the IB Code. The counsel for the corporate debtor i.e. Nadia Health Care relied on the input output test arguing that the operational debt are only those debts that have “a correlation of direct input to output produced or supplied by the corporate debtor”. However, the NCLT herein relied on the observations from the decision of the Supreme Court in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd.,[6] to conclude that the Supreme Court in the affirmative settled the issue of lease dues being an operational debt.

 

It is submitted that the same is erroneous because (i) the Supreme Court in Mobilox Innovations[7] did not discuss the issue of lease deeds in its own observations. The court had merely reproduced paragraphs from the report of the Bankruptcy Law Reforms Committee, a part of which had also touched upon rental and lease dues as a type of operational debt; and (ii) to begin with, the issue was not the subject-matter of dispute before the Supreme Court at all.

Therefore, the opinion of the NCLT in Sarla Tantia[8] may not be on strong footing.

 

Split in jurisprudence

A split in the jurisprudence before the NCLAT is found in the two rulings rendered by the NCLAT in M. Ravindranath Reddy v. G. Kishan,[9] on one side and Anup Sushil Dubey v. National Agriculture Coop. Mktg. Federation of India Ltd.[10] on the other.

 

In Ravidranath, the specific query was addressed by the NCLAT on whether a landlord by providing lease could be treated as operational creditor. The same was held by the Full Bench of NCLAT to not fall within the ambit of the definition of the term “operational debt”.[11] The NCLAT in Ravidranath[12] opined that the recommendation of the Bankruptcy Law Reforms Committee pertaining to the treatment of lessors/landlords as operational creditors, was not adopted by the legislature and only the claim in respect of goods and services were kept in the definition of operational creditor and operational debt under Sections 5(20) and 5(21) of the IB Code. Resultantly, it was concluded that the definition of an operational debt and operational creditor could not be interpreted to include rent dues as operational debt. Therefore, non-payment of rent does not amount to an operational debt.

 

There is a qualification added to the ruling in M. Ravindranath[13], when the NCLAT in Sanjeev Kumar v. Aithent Technologies (P) Ltd.[14] distinguished the former. In Sanjeev Kumar, the relationship between the creditor landlord and the debtor tenant was found to be not merely of the one to that of a landlord tenant but was held to also include certain provision of services such as electricity, diesel, sewer and water charges amongst others given to the debtor tenant. In such cases once the dues were found to be more than the pecuniary threshold, the debt was held to fall under the definition of an operational debt and an application under Section 9 of the Code was admitted.[15]

 

On the other hand in Anup Sushil Dubey[16] the NCLAT held that lease and licence agreements fall within the ambit of Section 5(21) of the IB Code. The NCLAT here noted that the appellants had leased out the premises for “commercial purpose” and the same fell within the meaning of term “service” under Section 5(21) of the IB Code. Then the NCLAT found the definition of “service” under the Consumer Protection Act, 2019 to be of relevance, which defines a service in the following manner :

(42) “service” means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, telecom, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.

 

The NCLAT similarly referred to the provisions of the Central Goods and Services Tax Act, 2017, which under the Schedule II lists down the activities that are to be treated as supply of goods or services, and in Para 2 of the Schedule stipulates as follows:

(a) any lease, tenancy, easement, licence to occupy land is a supply of services;

(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

 

On the basis of the above, taking into account that the premises were leased out for a commercial purpose, it was held that the dues claimed by the creditor squarely fell within the ambit of the definition of “operational debt” as defined under Section 5(21) of the Code.

 

It is essential to note that while M. Ravindranath[17] was a decision by a Full Bench of the NCLAT, the ruling in  Anup Sushil Dubey[18] was by a Division Bench. Furthermore, the NCLAT in Anup Sushil Dubey[19] while noted that the corporate debtor appellant before it, cited the ruling in M. Ravindranath[20]; the NCLAT however did not render any findings on the reference to M. Ravindranath[21].

 


C. Tenant claiming to be an Operational Creditor


On the other hand, as regards the claim of a tenant in its tenant landlord relationship is concerned, the position seems to be settled in Jindal Steel & Power Ltd. v. DCM International Ltd.[22] wherein it was held that tenants do not come within the meaning of “operational creditor” as defined under Sections 5(20) and (21), IB Code. In this case, the tenant sought to recover the security deposit on account of the termination of the lease agreement with the landlord. The NCLAT upheld the order of the NCLT rejecting the application filed under Section 9 by the tenant holding that the tenant does not come within the meaning of the term “operational creditor”.

 

It must also be noted here that while in Sarla Tantia,[23] the NCLT had referred to the Schedule II of the CGST Act, 2017[24] which in context of land and buildings, classifies “any lease, tenancy, easement, licence to occupy land” as a supply of services. Here in Jindal Steel[25], the NCLT held that the definition of “service” in the fiscal statutes has no bearing because the purpose of fiscal statutes is to generate revenue for the Government in the form of taxes, whereas the purpose of the IB Code is to consolidate and amend the laws relating to reorganisation and insolvency resolution.

 

Similar position was maintained in  D & I Taxcon Services (P) Ltd. v. Vinod Kumar Kothari,[26] where a tenant filed a claim on account of suffering damage in the tenanted premises due to a fire incident. The NCLAT clarified that the claim of the tenant does not constitute any operational debt since by using the demised premises as a tenant, the appellant could not be said to have been providing any “services”.

 

However, sub-tenants cannot be treated as a corporate debtor even if part of the payment is made directly by such sub-tenants to the operational creditor since the same will not create any relationship of operational creditor and debtor.[27]


Conclusion


On account of the differing viewpoints expressed by the NCLT and NCLAT, the issue on whether a landlord could claim to be an operational creditor remains unresolved.

 

Since different types of creditors are granted distinct rights under the IB Code framework, it is necessary to determine to which category, a creditor belongs to. In this context, it is possible that, in the future, a leasing agreement may not fall within either of the two categories of creditors who can file for initiating a corporate insolvency resolution process (CIRP), namely, financial and operational creditors, and that they will have to make a claim as other creditors. Categorisation as such would also lead to a significant loss of rights as such creditors would have no participatory role (whatsoever) in the CoC working.

The issue is now pending before the Supreme Court in Promila Taneja.[28]

 

Given the ambiguity surrounding the problem, the Supreme Court must evaluate the larger issue of claims resulting from the use of immovable property and other associated costs, and eventually resolve the question of whether rent arrears constitute as operational debt.

 

To sum up, unless the existing gaps in the Code regarding lease transactions, their treatment as secured creditors, the right to relinquish, and other factors discussed above are addressed, the true devil will lie in the strategically drafting of lease agreements, which will essentially make or break the rights available to the lessor.


Akaant Kumar Mittal is an advocate at the Constitutional Courts, and National Company Law Tribunal, Delhi and Chandigarh. He is also a visiting faculty at the National Law University, Mumbai and the author of the commentary Insolvency and Bankruptcy Code – Law and Practice.

“The author gratefully acknowledge the research and assistance of Sh. Priyanshu Fauzdar, pursuing law at NLU, Assam in writing this article.”

[1] The Report of the Bankruptcy Law Reforms Committee, Volume 1: Rationale and Design (Nov. 2015), Ch. 5.2.1, available online at HERE .

[2] The Report of the Bankruptcy Law Reforms Committee, Volume 1: Rationale and Design, (Nov. 2015), Ch.

5.2.1.

[3] The Report of the Bankruptcy Law Reforms Committee, Volume 1: Rationale and Design, (Nov. 2015), Ch.3.2.2.

[4] 2017 SCC OnLine NCLAT 380.

[5] 2018 SCC OnLine NCLT 16726.

[6] (2018) 1 SCC 353.

[7] (2018) 1 SCC 353.

[8] 2018 SCC OnLine NCLT 16726.

[9] 2020 SCC OnLine NCLAT 84.

[10] 2020 SCC OnLine NCLAT 674.

[11] The ruling in M. Ravindranath case, 2020 SCC OnLine NCLAT 84 has been followed subsequently in Aurora Accessories (P) Ltd. v. Ace Acoustics & Audio Video Solutions (P) Ltd., 2020 SCC OnLine NCLAT 527; Promila Taneja v. Surendri Design (P) Ltd., 2020 SCC OnLine NCLAT 1105.

[12] 2020 SCC OnLine NCLAT 84.

[13] 2020 SCC OnLine NCLAT 84.

[14] 2020 SCC OnLine NCLAT 734.

[15] 2020 SCC OnLine NCLAT 734.

[16] 2020 SCC OnLine NCLAT 674.

[17] 2020 SCC OnLine NCLAT 84.

[18] 2020 SCC OnLine NCLAT 674.

[19] 2020 SCC OnLine NCLAT 674.

[20] 2020 SCC OnLine NCLAT 84.

[21] 2020 SCC OnLine NCLAT 84.

[22] Jindal Steel & Power Ltd. v. DCM International Ltd., 2017 SCC OnLine NCLAT 441 upholding the order of the NCLT in Jindal Steel and Power Ltd. v. DCM International Ltd., 2017 SCC Online NCLT 989.

[23] 2018 SCC OnLine NCLT 16726.

[24] Central Goods and Services Tax, 2017, Schedule II read with S. 2(a).

[25] 2017 SCC Online NCLT 989.

[26] 2020 SCC OnLine NCLAT 878.

[27] Rahul Gupta v. Mahesh Madhavan, 2018 SCC OnLine NCLAT 263.

[28] Promila Taneja v. Surendri Design (P) Ltd., Civil Appeal No. 4237 of 2020, order dated 28-1-2021. (SC)

Case BriefsHigh Courts

Calcutta High Court: The Division Bench of Soumen Sen and  Ajoy Kumar Mukherjee, JJ., dismissed an appeal concerned with a breach of contract. The appeal arose out of a judgment in a suit for recovery of possession and injunction. Trial Court had decreed the suit on contest and dismissed the counter claim filed by the defendant.

Plaintiff was the landlord in respect of the suit premises, he had filed a suit for eviction in the Small Causes Court at Calcutta for eviction of the defendant/appellant who was a tenant under the plaintiff in respect of the second floor of the suit premises. During the pendency of the eviction suit appellant expressed her willingness to purchase the second floor of the suit premises and purchased the same for a consideration of Rs 13 lakhs.

The parties thereafter executed an agreement for sale on 15th February, 2006 which contained the detailed terms and conditions for the sale. Under the said agreement it was agreed that the entire consideration amount of Rs.13 lakhs shall be paid in installments commencing from December, 2006 and ending with November, 2008. It was further agreed that a sum of Rs.5 lakhs shall be paid within March 2007 as a condition precedent. The purchaser/defendant/appellant also agreed to pay a sum of Rs.40,000/- at the time of execution of the agreement which she paid by an account payee cheque bearing no. 253304 dated December 11,2006.

The plaintiff/respondent received Rs.40,000/- by cheque as the first installment. It should be noted that the balance consideration money was not paid. The defendant/appellant had also failed to make the payment of Rs.5 lakh within March 2007 as agreed between the parties. In view of such breach the plaintiff/respondent rescinded the said agreement and sued the defendant/appellant for recovery of possession.

Ms Sabita Mukherjee Roy Chowdhury, the Counsel for the appellant submitted that the Trial Judge completely erred in arriving at a finding that by reason of the execution of the agreement for sale, the relationship of the plaintiff and defendant as landlord and tenant ceased to exist. She further submitted that the intention of the parties was to continue with the relationship of the landlord and tenant until the execution of the sale deed. The termination of the agreement does not, ipso facto, give right to the landlord to evict the tenant on the ground of surrender of tenancy.

Mr Sourav Sen, the Counsel for the respondent, submitted that it was interesting to note that the agreement for sale used the expression ‘occupancy charge’ as opposed to “rent” thereby giving a clear indication that the period for which the appellant would remain in possession she would pay occupancy charges. He further submitted that when the appellant was inducted as tenant it meant that both the parties agreed that their relationship was to be that of landlord and tenant, which position however altered later when the landlord decided to sell the suit property to the tenant.

The Court clearly inferred that the parties consciously entered into the agreement for sale thereby altering their respective status. The agreement for sale was entered to at a point of time when the earlier suit for eviction was pending.

The defendant/appellant did not deny the due execution of the said agreement. The Court noted that evidence showed that the said agreement was acted upon and parties have altered their position on the basis of the said agreement. Once the agreement was entered into and acted upon the old relationship of landlord and tenant came to an end.

The Court reiterated the relevant paragraph of the Supreme Court ruling in R. Kanthimathi v. Beatrice Xavier, (2000) 9 SCC 339 which stated:

“This decision clearly spells out that once there is agreement of sale between a land lord and a tenant, the old relationship as such comes to an end. It goes on to record that even after the cancellation of such agreement of sale the status of tenant is not restored as such. In other words, on the date of execution of the aforesaid agreement of sale their status as that of landlord and tenant changed into a new status as that of a purchaser and a seller.”

The Court in these circumstances dismissed the appeal holding that parties who have acted in terms of the agreement for sale and altered their relationship consciously cannot now go back to their old relationship and seek relief in terms of such relationship. There is a clear and conscious act on the part of the appellant to surrender her right as a tenant to acquire a superior right of an owner of the second floor of the suit premises. [Sashi Jain v. Sandip Sarkar, 2022 SCC OnLine Cal 388, decided on: 02-03- 2022]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: In the instant appeals, the Market Committees located in Rajasthan raised their grievance over the decision of CESTAT that respective Market Committees are liable to pay service tax under the category of ‘renting of immovable property service’ for the period upto 30.06.2012. The Division Bench of M.R. Shah* and B.V. Nagarathna, JJ., while observing that in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining defined meaning; dismissed the appeals and held that on and after 01.07.2012, such activities carried out by the Agricultural Produce Market Committees is placed in the Negative List. If the intention was to exempt such activities of the Market Committees from levy of service tax, then there was no necessity to place such activity of the Market Committees in the Negative List. Therefore, it can be safely said that that, the Market Committees were not exempted from payment of service tax on such activities.

Facts: Krishi Upaj Mandi Samitis (Agricultural Produce Market Committees) were established in Rajasthan under the provisions of Rajasthan Agricultural Produce Markets Act, 1961. The committees regulate sale of agricultural produce in the notified markets. They charged “market fee” for issuing license to traders, agents, factory/storage, company or other buyers of other agricultural produce. They also rented out the land and shops to traders and collect allotment fee/lease amount for such land/shop.

The Revenue was of the view that the appellants are liable to pay the service tax on the services rendered by them by renting/leasing the lands/shops. The same was challenged by the appellants. However CESTAT noted that with the introduction of Negative List Regime of taxation w.e.f. 01.07.2012, the services in question were excluded from the tax liability and therefore the appellant(s) being an Agricultural Produce Market Committee was/were excluded from tax liability on and after 01.07.2012; i.e. Market Committees are not liable to service tax for the period after 01.07.2012, however CESTAT held that Market Committees are liable to pay service tax under the category of “renting of immovable property service” for the period upto 30.06.2012.

The grievance of the appellants was centered around Circular No.89/7/2006 dated 18.12.2006. As per the Circular, activities performed by the sovereign / public authorities under the provisions of law being mandatory and statutory functions and the fee collected for performing such activities is in the nature of a compulsory levy as per the provisions of the relevant statute and it is deposited into the Government Treasury, no service tax is leviable on such activities. Paragraph 3 of the Circular, specifically clarifies that if such authority performs a service, which is not in the nature of a statutory activity and the same is undertaken for consideration, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service.

Contentions: The counsels for the appellants Prakul Khurana and Ms. Divyasha Mathur, submitted before the Court that the activity of allotting shops/premises/spaces to traders and brokers by the respective Market Committees for the purpose of storage and/or marketing of agricultural produce is in the nature of a statutory activity as mandated under S. 9 of Rajasthan Agricultural Produce Markets Act, 1961 and, therefore, the Market Committees are exempted from payment of service tax on such services as per Circular. They further contended that the fees collected by the respective Market Committees on renting/leasing the land/shop will be deposited in the Market Committee Fund and the same shall be ultimately used for the betterment of the market area, thus when the Market Committees are the public authorities under the 1961 Act and when they perform the statutory duty / function of allotment/renting/leasing of land/shop, then such Market Committees are entitled to the exemption provided under the 2006 Circular.

The counsel for the respondent, Nisha Bagchi submitted before the Court that the activities of allotment/renting/leasing of the shop/shed/platform/land cannot be said to be a mandatory statutory activity and therefore, the Market Committees are not exempted from service tax as per 2006 Circular. She further argued that as per the language used in the legislation, S. 9 of the 1961 Act, is an enabling provision and does not cast a mandatory duty over the Market committees to allot/rent/lease the shop/land/platform.  Therefore the activities of renting/leasing by the Market Committees to the traders cannot be said to be a statutory activity, hence the market committees are not entitled to claim any exemption under the 2006 circular. The respondents further contended that exemption notification should be strictly construed and given meaning according to legislative intent and that the statutory provisions providing for exemption have to be interpreted in light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions.

Observation: Perusing the 2006 Circular, the Court noted that language used is clear and unambiguous. Applying the principles of interpretation of statutes, the Court observed that, “It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the relevant policy and the exemption notifications issued in that regard”.

The Court observed that the contention of the appellants stating that the activity of rent/lease/allotment of shop/land/platform/space is a statutory activity and the Market Committees are performing their statutory duties under S. 9 hence the entitlement to exemption, holds no substance.

After carefully perusing the words used in S. 9, the Court stated that the activity cannot be said to be a mandatory statutory activity as contended by appellants since the fee collected is not deposited into the Government Treasury; it will go to the Market Committee Fund and will be used by the market committees. Thus such a fee collected cannot have the characteristics of the statutory levy/statutory fee. Thus, under the1961 Act, it cannot be said to be a mandatory statutory obligation of the Market Committees to provide shop/land/platform on rent/lease. “If the statute mandates that the Market Committees have to provide the land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutory obligation otherwise it is only a discretionary function. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed”.

[Krishi Upaj Mandi Samiti v. Commissioner of Central Excise and Service Tax, 2022 SCC OnLine SC 224, decided on 23-02-2022]


*Judgment by: Justice MR Shah


Sucheta Sarkar, Editorial Assistant has put this report together

Case BriefsHigh Courts

Bombay High Court: A.S. Gadkari, J., while addressing a matter of the eviction of a tenant focused on the modes of serving a notice under Section 106 of the Transfer of Property Act, 1882.

The instant petition was preferred by a landlord impugning the decision of lower court allowing the said appeal preferred by the respondent-tenant.

Petitioner-plaintiff had filed the RCS No. 881 of 1990 for eviction of the respondent on the ground of default in payment of rent as contemplated under Section 12(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947.

Petitioner was the owner of a plot and he had constructed a chawl known as ‘Munnar Yadav chawl’. The respondent tenant was allotted in the said chawl on a monthly rental basis. The rent of the Suit property was determined at Rs 37 per month.

 As the Respondent was in arrears of rent from 1-08-1982 and did not pay it despite repeated demands, the Petitioner through his Advocate issued notice and tenancy was also terminated.

As far as pasting of a notice on the conspicuous part of the concerned Suit premises, the Petitioner had proved the said fact by leading evidence of himself and examining a witness.

Trial Court’s decision

Trial Court held that, the Petitioner had proved that the Defendant had committed default in payment of arrears of rent from 1-08-1982 and despite receipt of notice dated 30-03-1990, he failed to pay the said arrears to the Petitioner or deposit the same on the date of first hearing before the Trial Court.

Appellate Court’s decision

Appellate Court had recorded a finding that, the Petitioner did not attempt to serve notice upon the Respondent by the modes prescribed under Section 106 of the Transfer of Property Act, 1882 and on that predominant rather sole ground, reversed the findings recorded by the Trial Court.

Analysis, Law and Decision

High Court noted that the evidence on record revealed that the petitioner-plaintiff did not prove the service of suit notice upon the respondent by adopting the first two modes mentioned in Section 106 of the TP Act.

Section 12(2) of the Rent Act of 1947, states that, “No suit for recovery of possession shall be instituted by a landlord against tenant on the ground of non-payment of the standard rent or permitted increases due, until the expiration of one month next after notice in writing of the demand of the standard rent or permitted increases has been served upon the tenant in the manner provided in Section 106 of the Transfer of Property Act 1882”.

Section 106 (4) of the TP Act prescribed that, every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.

As far as the third mode of service was concerned i.e. by tender or delivery of the notice to one of the family members or servants at the residence of tenant is concerned, the Petitioner had averred that, though he tried to serve the said notice upon the Respondent personally, he refused to accept it. Respondent in his evidence has denied the said fact and therefore doubt is created in the mind of the Court about service of notice by adopting the third mode by the Petitioner.

As far as service of notice by the Petitioner by adopting fourth mode i.e. by fixing it on a conspicuous part of the Suit property is concerned, the Petitioner apart from leading his own evidence on that behalf, has also examined a panch witness.

High Court opined that the Appellate Court did not even touch the vital aspect of the service of notice upon the respondent by adopting the fourth mode by the petitioner. Appellate Court failed to take into consideration the necessary and relevant evidence available on record, rather had not taken into consideration it at all and therefore had committed an error in reversing the findings and passing of the decree by the Trial Court.

Therefore, the petitioner did serve the notice under Section 12(2) of the Rent Act upon the respondent by adopting the mode prescribed under Section 106 of the TP Act.

Hence, Bench held that interference of this court was required in view of the above background.

The Court directed respondents to hand over the vacant and peaceful possession of the Suit premises in favour of the Petitioner within a period of two months from the date of uploading of the present Judgment on the official website of the Bombay High Court. [Munnar Lavtan Yadav v. Ashok Dalvi, 2021 SCC OnLine Bom 6189, decided on 1-12-2021]


Advocates before the Court:

Mr Mandar Limaye for the Petitioner. None for the Respondents.

Case BriefsHigh Courts

Delhi High Court: Prathiba M. Singh, J., while quoting that ‘Promises are meant to be broken’ stated that the law has evolved the doctrines of legitimate expectation and promissory estoppel to ensure that promises made by the Government, its officials and other authorities are not broken and are, in fact, judicially enforceable, subject to certain conditions.

Promise by Chief Minister of Delhi

Petitioners filed the instant petition seeking enforcement of CM of Delhi’s promise.

Petitioners sought the recovery/payment/refund of the monthly rental amount, as per the promise made by the CM.

What was the promise?

CM, Delhi in a press conference on 29-3-2020, amidst the pandemic requested all the landlords to postpone the demand/collection of rent from those tenants who were poor and poverty-stricken.

CM, in the press conference, had made a clear promise that if any tenant is unable to pay the rent due to poverty, the Government would pay his/her rent on their behalf.

“…a solemn assurance was given that the Government would take care of the tenants.”

Analysis, Law and Decision

Bench on perusal of various decisions of the Courts laid down the salient principles of the doctrines of promissory estoppel and legitimate expectation:

Principles from decisions in India:

In India, the two doctrines of promissory estoppel and legitimate expectation have been moulded and expanded further, in order to suit the economic and social conditions prevalent in India. Some of the principles that emerge are:

i)  If a representation is made by the Government, the question is whether it should be allowed to go back on it and whether such an act of resiling from the said assurance would constitute legal fraud.

ii)  It is necessary to promote honesty and good faith in governance. Therefore, if a promise has been made, the Government has a duty to fulfil the same.

iii)  Executive necessity does not constitute an adequate reason to not give effect to a representation.

iv)  If the promise made is clear and unequivocal then the Court can enforce it.

v)  If the promise is acted upon by the promisee, the need to enforce the said promise becomes stronger. There need not be any detriment caused. Mere action on the promise is sufficient for cause of action to arise.

vi)  Under the traditional law of contracts, unless and until, the terms are agreed upon, there would be no contract. However, the doctrine of promissory estoppel is an exception, i.e., no contract is required to enforce a promise made by the Government, if the Government made the same consciously, with an intention for it to be acted upon by the citizen.

vii)  It is important to bridge the gap between law and morality and these two doctrines of promissory estoppel and legitimate expectation are judicial contributions in the said direction.

viii)  Relief based on legitimate expectation or promissory estoppel can be refused only if it is unequitable to hold the Government to its promise.

ix)  If public interest would be prejudiced by enforcing the said promise, only then, relief may be refused. The only exception is overriding public interest or when enforcement is unfair or contrary to public interest. However, the Government would have to disclose the facts that would exempt it from enforcing the said promise and a mere claim in respect of the same would not be sufficient to establish overriding public interest.

x)  A mere ipse dixit would not work, and the Government cannot presume a self-exemption. Only a Court can grant exemption from liability for not adhering to the assurance, provided the Government shows proper justification.

xi)  High ranking officials who may have made representations or given assurances or promises, can, due to the position they hold, bind the Government to their statements.

xii)  It is presumed that once a representation is made by a high- ranking official, the same is within the scope of its authority.

xiii)  If the representation or promise made or is prohibited by law then it cannot be enforced.

xiv)  The relief that may be given by the Court, in the case of an unconscionable departure from a promise is flexible, so as to remedy the injustice caused.

xv)  The mere non-issuance of a notification would not stand in the way of granting relief, if the facts justify the same, as the same would only be a ministerial act.

xvi)  Both these doctrines have to be expansively interpreted, as a recognition of the doctrine of fairness and non-arbitrariness.

xvii)  The legitimate expectation of a citizen ought to be considered and given due weight in decision making. It is a relevant factor for consideration in the decision-making process.

xviii)  Failure to adhere to a promise without adequate justification violates the trust between the Government and the citizen.

xix)  The broad exceptions to not grant relief on the basis of these principles would be – mistake, or if the same is unfair and contrary to public interest.

xx)  The doctrine of legitimate expectation is broader in its scope than the doctrine of promissory estoppel, and it may be based on past practice of the authorities. It need not involve a specific statement and is meant to ensure non-arbitrariness in State action.

xxi)  The doctrine of legitimate expectation and its enforcement is an integral part of non-arbitrariness and non-abuse of power as enshrined in Article 14 of the Constitution.

Now, moving on to analysing the facts, Bench noted that the address by the CM in the press conference has three dimensions:

  • The first dimension is an appeal to the landlords.
  • Second is a promise to landlords that it would pay on behalf of the tenants, if they are unable to due to lack of means and poverty, and
  • thirdly, it has a warning to landlords to not coerce the tenants.

Whether the said statements given by the CM were enforceable by applying either the doctrine of legitimate expectation or promissory estoppel?

Further, Bench stated that the promise made by the CM was under the premise that COVID-19 may be over within two-three months, as the words used were  आश्वासन (assurance or promise) and भुगतान (reimbursement) for the landlords, on behalf of the tenants.

High Court expressed that the principles governing the doctrines of legitimate expectation and promissory estoppel primarily recognize the role of the State of the Governmental authorities vis-à-vis the public.

Adding to the above, High Court stated that the said doctrines are a reflection of the legal recognition being accorded to the trust that citizens repose on promises/assurances/representations which are made by Constitutional functionaries and governmental authorities, especially in times of distress.

The raison d’être for granting recognition to such assurances/promises/representations, is that such functionaries and authorities, who are either elected to public positions or who hold positions of power, are answerable to the people, especially once they undertake or agree to do or not to do a particular thing.

Legal Enforceability

Bench expressed that the question as to whether a promise/assurance/representation results in a legally enforceable right and if so, what would be the relief that a Court can grant, depends upon the factual circumstances of each case and the context in which the said promises/assurance or representations have been made by the Governmental authorities.

Judicial Enforceability

The assurance given or the promise made in the present case was obviously with a view to stop or curb the migration of people from Delhi to the extent possible.

The actual effect of the promise or the assurance was beyond the scope of the present writ petition, inasmuch as there was no clarity as to whether the assurance resulted in tenants staying back.

However, this Court cannot be dismissive of the fact that the Petitioners, who are before the Court, claim to have acted on the promise or the assurance made by the CM. It would not be unreasonable to presume that some tenants and landlords may have altered their positions based upon the assurance given by the CM.

The salient facts and features of the present case were:

(1) Exceptional circumstances of the COVID-19 pandemic.

(2) Extreme distress being faced by migrant labourers and blue-collar workers and employees.

(3) A clear promise/assurance made by the CM.

(4) No positive policy to implement the said promise/assurance given by the GNCTD.

(5) No contrary policy implemented by the government, placed before the Court.

(6) No decision taken to not implement the said promise/assurance that was given by the CM.

(7) The exception of public interest having not been invoked for the non-implementation of the promise/assurance.

What should be the conduct of the Government, in the context when a senior functionary like the CM gives a promise/assurance to the public, which is categorical, unequivocal and unambiguous?

Court opined that such inaction would not be permissible when clearly the making of the promise/assurance by the CM was not in doubt, and was in fact admitted by the GNCTD.

Doctrines of Promissory Estoppel and Legitimate Expectation

The said doctrines are based on the axiom that the people trust the government.

In a democratic setup, persons who hold an elected office, and especially heads of government, heads of State and those holding responsible positions are expected to make responsible assurances/promises to their citizens, especially in times of crisis and distress. On behalf of the citizens, there would obviously be a reasonable expectation, that an assurance or a promise made by a senior Constitutional functionary, not less than the CM himself, would be give effect to.

If the GNCTD had actually come out with a policy either deciding to not implement the said promise or assurance on grounds which are legally sustainable, obviously the Courts cannot interfere. However, even applying the basic Wednesbury principles, the decision making, after the promise was made, ought not to be an arbitrary one.

 Bench held that in the backdrop of the commitment made, it is not the positive decision making which is arbitrary, but the lack of decision making or indecision, which this Court holds to be contrary to law.

Once the CM had made a solemn assurance, there was a duty cast on the GNCTD to take a stand as to whether to enforce the said promise or not, and if so on what grounds or on the basis of what reasons.

In the context of upholding Fundamental Rights, the principles of legitimate expectation have to be accorded a higher pedestal and the burden on the authority concerned not to honour the same, is even higher.

Conclusion

A statement given in a consciously held press conference, in the background of the lockdown announced due to the pandemic and the mass exodus of migrant labourers, cannot be simply overlooked. Proper governance requires the Government to take a decision on the assurance given by the CM, and inaction on the same cannot be the answer.

The expectation of the citizens could be that the Government would implement the promise, however, when this Court is examining this promise and the expectation that comes with it, the question is whether there is any reason as to why the Government did not even take a decision in this regard.

To that extent, insofar as the indecision is concerned, the GNCTD needed to answer the question, which it has failed to answer. 

Elaborating more, Court stated that the said promise was to act as a balm on the wounds of landlords and tenants, who were severely affected as a class of citizens in Delhi. However, the lack of any decision to implement, or a conscious reasoned decision not to implement, has resulted in non decisionem factionem in respect of the legitimate expectation of its citizens. The statements made by persons in power are trusted by the public who repose faith and believe in the same.

Thus, “puffing” which may be permissible in commercial advertising, ought not to be recognisable and permissible in governance.

Whether the statement made by the CM can be completely ignored and can be held to be not binding on the GNCTD?

In Court’s view, the promise/assurance/representation given by the CM clearly amounts to an enforceable promise, the implementation of which ought to be considered by the Government. Good governance requires that promises made to citizens, by those who govern, are not broken, without valid and justifiable reasons.

Lastly, the Court concluded by laying down the following directions:

  1. The GNCTD would, having regard to the statement made by the CM on 29th March, 2020, to landlords and tenants, take a decision as to the implementation of the same within a period of 6 weeks;
  2. The said decision would be taken, bearing in mind the larger interest of the persons to whom the benefits were intended to be extended in the said statement, as also any overriding public interest concerns.
  3. Upon the said decision being taken, the GNCTD would frame a clear policy in this regard.
  4. Upon the said decision being taken, if a Scheme or Policy is announced, the Petitioners’ case be considered under the said Scheme/Policy as per the procedure prescribed therein, if any.

Petition was disposed of in the above terms. [Najma v. GNCTD, 2021 SCC OnLine Del 3775, decided on 22-07-2021]


Advocates before the Court:

For the Petitioner: Gaurav Jain, Advocate

For the Respondent: Rahul Mehra, Sr. Advocate with Mr. Gautam Narayan, ASC, GNCTD and Mr. Adithya Nair, Advocate.

Case BriefsHigh Courts

Delhi High Court: Sanjeev Narula, J., issued notice to the respondent in a petition filed under Section 9 [interim measures, etc. by the court] of the Arbitration and Conciliation Act, 1996.

In the instant petition, it was stated that the disputes arose between the parties pertaining to arrears of rent and other charges arising under Memorandum of Understanding (MOU).

The said MOU was originally executed between the petitioner and Adlabs Films Limited.  Subsequently, Reliance Media Works Limited stepped into the shoes of Adlabs Films Limited and later transferred its business in favour of the respondents.

The Deed of Adherence recorded that the parties had entered into the MOU and the Addendum, further it was also mentioned in the deed that the respondent agreed and confirmed that it shall be bound by all the provisions of the agreement as entered into with the original party and also the agreement shall have the full force of binding effect on the party.

Since the respondent defaulted in making payments towards rent, conducting charges and CAM charges, due under the agreements, the petitioner was constrained to issue the legal notice making the demand of Rs 2.04 Crores.

But the respondent refuted the above compliance citing the COVID-19 pandemic situation.

Petitioner’s counsel further submitted that, though the arbitration clause has not yet been invoked, but the petitioner has all intention to invoke the same.

Adding to the above it was submitted that pending the appointment of Arbitral Tribunal, urgent interim direction were necessary.

Bench directed for the issue of notice to the respondent by all modes, upon the filing of process fee, returnable on 05-04-2021.[Dart Properties (P) Ltd. v. Cinema Ventures (P) Ltd., 2021 SCC OnLine Del 990, decided on 24-02-2021]


Advocates who appeared before the Court:

For the Petitioner: Swarnendu Chatterjee, Advocate

Legislation UpdatesStatutes/Bills/Ordinances

Governor of Uttar Pradesh promulgates the Uttar Pradesh Regulation of Urban Premises Tenancy Ordinance, 2021

Purpose of the Ordinance: To establish Rent Authority and Rent Tribunals to regulate renting of premises and to protect the interests of landlords and tenants and to provide speedy adjudication mechanism for resolution of disputes and matter connected therewith or incidental thereto.

[Section 3] Ordinance not to apply to certain premises:

  • Premises owned by the Central or State Government or Union Territory Administration or a Government undertaking or Enterprises or Statutory Body or Cantonment Board.
  • Premises owned by a Company, University or Organisation given on rent to its employees as part of service contract
  • Premises owned by religious or charitable institution as may be specified, by State Government’s notification.
  • Premise owned by Auqaf registered under the Waqf Act, 1995 or by any public trust registered under applicable law.
  • Other building or category of buildings specifically exempted in public interest by notification by the State Government.

 [Section 4] Tenancy Agreement

 No person shall, after the commencement of this Ordinance, let or take on rent any premises except by an agreement in writing, which shall be informed to the Rent Authority by the landlord and tenant jointly.

In case the tenant and landlord fail to jointly inform the execution of the tenancy agreement, the both of them shall separately inform the execution of tenancy agreement to the Rent Authority within a period of 1 month from the date of expiry.

[Section 5] Period of Tenancy

 Every tenancy entered into after the commencement of this Ordinance shall be valid for a period as agreed upon between the landlord and the tenant.

Tenant may request the landlord for renewal or extension of the tenancy, within the period agreed to in tenancy agreement, and if agreeable to the landlord, may enter into a new tenancy agreement with the landlord or mutually agreed terms and conditions.

 If a tenancy for a fixed term ends and has not been renewed or the tenant fails to vacate the premises at the end of such tenancy, then such tenant shall be liable to pay an enhanced rent to the landlord.

[Section 6] Rights and Obligations of successor in case of death

 Terms of agreement shall be binding upon their successors in the event of the death of the landlord or tenant, the successor of the deceased landlord or tenant shall have the same rights and obligations as agreed to in the tenancy agreement for the remaining period of such tenancy.

In the event of the death of tenant, the right of tenancy shall devolve on his successors, namely:

Spouse, son or daughter or where there are both son and daughter, both of them; parents; daughter-in-law, being the widow of his pre-deceased son; widowed or divorced sister

[Section 7] Restriction on sub-letting

 No tenant shall, except by entering into a supplementary agreement to the existing tenancy agreement:

  • Sub-let whole or part of the premises held by him as a tenant
  • Transfer or assign his rights in the tenancy agreement or any part thereof

[Section 10] Rent Authority to determine the revised rent in case of dispute

 In determining the rent to be revised, the rent authority may be guided by the prevailing market rent in the surrounding areas let out on rent.

[Section 11] Security Deposit

 Security deposit to be paid by the tenant in advance shall be such as may be agreed upon between the landlord and the tenant in the tenancy agreement, which shall be:

  • Not exceed two months’ rent, in case of residential premises; and
  • Not exceed 6 months’ rent, in case of non-residential premises.

Security Deposit shall be refunded to the tenant on the date of taking over vacant possession of the premises from the tenant, after making due deduction of any liability of the tenant.

[Section 14] Deposit of rent with Rent Authority

 Where the landlord refuses to accept any rent and other charges payable or refuses to give a receipt, the rent and other charges shall be paid to the landlord by postal money order or any other method, in such manner as may be prescribed, consecutively for two months, and if the landlord refuses to accept the rent and other charges within such period, then the tenant may deposit the same with the Rent Authority.

In case the tenant is unable to decide as to whom the rent is payable during the period of tenancy agreement, the tenant may, in such case, deposit the rent with the rent authority.

[Section 15] Repair and Maintenance of Property

 In case tenant fails or refuses to carry out the repairs, the landlord may carry out the repairs and deduct the amount incurred for such repairs from the security deposit and the amount so deducted shall be paid by the tenant within a period of one month of the issue of notice by the landlord.


To read more, click on the link below: Tenancy Ordinance

Op EdsOP. ED.

1. Chapter V (Sections 105 to 117) of the Transfer of Property Act, 1882[1] (for short ‘TPA’) embodies the provisions relating to the leases of immoveable property. Section 105 of TPA defines a lease as:

105. Lease defined.—  A lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined.— The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.”

2. The above definition of the lease under TPA postulates that besides other essential elements of a lease i.e. the parties being the lessor and the lessee; the subject-matter being an immoveable property; demise being a transfer of a right to enjoy; and the consideration being a price paid or promised being the premium or the rent, the time or the term or period of the said lease is an essential requisite of a valid lease. A valid lease may be granted for a certain time, express or implied, or in perpetuity. A lease which is silent as to the duration of its term will not be lease within the meaning of Section 105 of TPA.

3. The commencement of a lease must be certain or capable of being ascertained with certainty afterwards, so that both the time when it begins and the time when it ends, is fixed. A provision in the lease relating to duration thereof may be implied by law or usage. Even Section 106 of TPA, inter alia provides that in absence of a contract or local law or usage to the contrary, a lease of immoveable property for agricultural or manufacturing purposes shall be deemed to be lease from year to year and that a lease of immoveable property for any other purpose shall be deemed to be lease from month to month.

4. Section 107 of TPA provides as to how the leases of immoveable property shall be made in law. The said section reads as under:

107. Leases how made.— A lease of immoveable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument.

All other leases of immoveable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immoveable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee:

Provided that the State Government may from time to time, by notification in the Official Gazette, direct that leases of immoveable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.”

5. This section prescribing the procedure for making of a lease between the parties classifies them into two”

One, a lease of immoveable property from year to year, or for a term exceeding a year, or lease reserving a yearly rent, can only be made by a registered document; and

Second, all other leases other than the above, can either be made by registered instrument, or the said lease to be made by an oral agreement accompanied by delivery of possession.

6. Therefore, it is manifest that all the leases of immoveable property not covered in the second classification shall have to be necessarily made by a registered document only. Needless to state that all the leases not covered by the first above have to be made either by registered document or by an oral agreement accompanied by delivery of possession.

 Effect of non-registration

7. Section 17(1)(d) of the Registration Act, 1908[2] provides that leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent have to be necessarily registered.

8. Section 49 of the same Act, inter alia provides that no instrument which is compulsorily required to be registered shall affect any immovable property comprised therein, or confer any power to adopt, or be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered. However, an unregistered document affecting immovable property and required by the Registration Act or the TPA to be registered, may be received as evidence of any collateral transaction not required to be effected by registered instrument.

9. As already noted, period of tenancy is an essential requisite of a valid lease. Therefore, an unregistered lease deed cannot be looked into for purposes of period of tenancy. It thus follows that in respect of the leases classified in One under Section 106 TPA which require compulsory registration for making of a lease in law under Section 107 of TPA and is not so registered, the said instrument cannot be used for the purpose of establishing that it created, declared, assigned, limited or extinguished any right to the property comprised in the said document, and the said document will only create a month to month tenancy or year to year depending upon the purpose thereof. Therefore, if Sections 106 and 107 TPA are read accordingly, there shall be no conflict between the two.

10. The Calcutta High Court in the decision reported as Debendra Nath Bhowmick v. Syama Prosanna Bhowmick[3],  laid down the following dicta:

 “Then assuming that this case is governed by the Transfer of Property Act, I should like to notice the argument that because an annual rent was mentioned, the tenancy must be taken to be a yearly one. The lease was not for agricultural or manufacturing purposes and therefore must, in the absence of a contract to the contrary, be deemed to be a tenancy from month to month. It is said here that there was such a contract, for a yearly tenancy is to be implied from the mention of an annual rent. But when Section 106 speaks of a contract I think it means a valid contract. But in the present case there is no such contract and under Section 107 a lease such as is argued, for in this appeal can only be created by a registered instrument and there is none here. The notice was therefore sufficient so far as the tenancy is concerned.”

 11. Whether tenancy of immovable property for any purpose other than agricultural or manufacturing created by an unregistered instrument would be deemed to be ‘month to month’ tenancy even where the tenant has paid annual/yearly rent to the landlord has been answered in a three-Judge Bench decision of the Supreme Court reported as Ram Kumar Das v. Jagdish Chandra Deo[4]. The facts of said case were that the landlord had not executed a registered instrument for lease of land in favour of tenant. The tenancy created was neither for agricultural or manufacturing purpose. On two occasions, the tenant had tendered annual rent to the landlord. The landlord had terminated the tenancy by giving 15 days’ notice in terms of the second paragraph of Section 106 of TPA by treating the tenancy as from month to month. The question which had arisen before the Supreme Court was whether the tenancy was a monthly tenancy as treated by the landlord or a yearly tenancy since the tenant had paid annual rent to the landlord. It was argued on behalf of the tenant that in view of the fact that rent paid by the tenant was annual rent, it can be inferred that the intention of the parties was certainly not to create monthly tenancy but yearly tenancy, which argument was negatived by the Court in the following terms:

“….It is conceded that in the case before us the tenancy was not for manufacturing or agricultural purposes. The object was to enable the lessee to build structures upon the land. In these circumstances, it could be regarded as a tenancy from month to month, unless there was a contract to the contrary. The question now is, whether there was a contract to the contrary in the present case? Mr. Setalvad relies very strongly upon the fact that the rent paid here was an annual rent and he argues that from this fact it can fairly be inferred that the agreement between that parties was certainly not to create a monthly tenancy. It is not disputed that the contract to the contrary, as contemplated by Section 106 of the Transfer of Property Act, need not be an express contract; it maybe implied, but it certainly should be a valid contract. If it is no contract in law, the section will be operative and regulate the duration of the lease. It has no doubt been recognised in several cases that the mode in which a rent is expressed to be payable affords a presumption that the tenancy is of a character corresponding thereto. Consequently, when the rent reserved is an annual rent, the presumption would arise that the tenancy was an annual tenancy unless there is something to rebut the presumption. But the difficulty in applying this rule to the present case arises from the fact that a tenancy from year to year or reserving a yearly rent can be made only by registered instrument, as laid down in Section 107 of the Transfer of Property Act (vide Debendra Nath v. Syama Prosanna[5]. The Kabuliyat in the case before us is undoubtedly a registered instrument but ex concessis it is not an operative document at all and cannot consequently fulfil the requirements of Section 107 of the Transfer of Property Act.

  1. This position in fact is not seriously controverted by Mr. Setalvad; but what he argues is that a lease for one year certain might fairly be inferred from the payment of annual rent, and a stipulation like that would not come within the mischief of Section 107 of the Transfer of Property Act. His contention is that the payment of an annual rent, as was made in the present case, is totally inconsistent with a monthly lease. We are not unmindful of the fact that in certain reported cases, such inference has been drawn. One such case has been referred to by Reuben, J. in his judgment [Aziz Ahmad v. Alaudd in Ahmad[6] , where reliance was placed upon an earlier decision of the Calcutta High Court (Md. Moosa v. Jaganund[7])]. A similar view seems to have been taken also in Matilal v. Darjeeling Municipality[8].
  2. But one serious objection to this view seems to be that this would amount to making a new contract for the parties. The parties here certainly did not intend to create a lease for one year. The lease was intended to create a lease for one year, but as the intention was not expressed in the proper legal form, it could not be given effect to. It is one thing to say that in the absence of a valid agreement, the rights of the parties would be regulated by law in the same manner as if no agreement existed at all; it is quite another thing to substitute a new agreement for the parties which is palpably contradicted by the admitted facts of the case.
  3. It would be pertinent to point out in this connection that in the second appeal preferred by the plaintiff against the dismissal of his earlier suit by the lower appellate court, the High Court definitely held that the defendant’s tenancy was one from month to month under Section 106, Transfer of Property Act, and the only question left was whether payment to the Receiver amounted to payment to the plaintiff himself. In this suit the defendant admitted in his written statement that payment to the Receiver had the same effect as payment to the plaintiff, and the trial Judge took the same view as was taken by the High Court on the previous occasion, that by payment too and acceptance of rent by the Receiver, the defendant become a monthly tenant under Section 106, Transfer of Property Act. In his appeal before the District Judge which was the last court of facts, the only ground upon which the defendant sought to challenge this finding of the trial Judge was that the Receiver was an unauthorised person because of the decision of the Judicial Committee which set aside his appointment and consequently acceptance of rent by such person could not create a monthly tenancy. This shows that it was not the case of the defendant at any stage of this suit that because one year’s rent was paid a tenancy for one year was brought into existence. We think, therefore, that on the facts of this case it would be quite proper to hold that the tenancy of the defendant was one from month to month since its inception in 1924. This view finds support from a number of reported cases (vide Debendra Nath v. Syama Prasanna[9] ; Sheikh Akloo v. Emaman[10]), and in all these cases the rent payable was a yearly rental. On this finding no other question would arise and as the validity of the notice has not been questioned before us, the plaintiff would be entitled to a decree in his favour. The appeal thus fails and is dismissed with costs.”

 12. The effect of a compulsorily registrable lease, if not registered, was also explained by the e Delhi High Court in Deluxe Dentelles Pvt. Ltd. v. Ishpinder Kochhar[11] as under:

“21. A lease granted for any purpose, be it residential, commercial, manufacturing or agricultural, can be made only by a registered instrument if duration of the lease is for the period stated in the first paragraph of Section 107 of the Transfer of Property Act, 1882. But, a lease for the same purpose(s) of a lesser duration can be made, under the second paragraph, either by a registered instrument or by an oral agreement accompanied by delivery of possession.

  1. If one looks to Section 106 of the Transfer of Property Act it becomes evident that the classification of leases is according to their purpose. Section 106 classifies leases of immovable property for agricultural and manufacturing purposes in one class and all other leases in different class.
  2. Sub-section (1) of Section 106 is a deeming provision as per which, in the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year. Thus, where the parties have themselves indicated the duration of the lease relatable to agricultural or manufacturing purposes, sub-section (1) of Section 106 o f the Transfer of Property Act would be redundant. This is evident from the fact that sub-section (1) of Section 106 operates only “in the absence of a contract…..to the contrary”.
  3. Pertaining to leases, excluding leases for agricultural or manufacturing purposes, the legal fiction created in the second paragraph of sub-section (1) of Section 106 is to deem the leases to be from month to month. Of course, this deeming provision would also be ‘in the absence of a contract….to the contrary’.
  4. In the present case, the defendants have admitted the jural relationship of landlord and tenant between the plaintiff and Defendant 1. As per both plaintiff and defendants, Defendant 1 was inducted as a tenant in the suit premises by virtue of unregistered lease-deed dated November 21, 1999 for a period of eleven years and eleven months.
  5. The case (defence) set up by the defendants is that notwithstanding the fact that the lease-deed dated November 21, 1999 executed between the parties is an unregistered document, the tenancy of Defendant 1was not from month to month but for a period of eleven years and eleven months with an option to Defendant 1 to renew the lease by another period of eleven years inasmuch as Defendant. 1 had paid rent in advance to Ms. Neeta Mehra, erstwhile owner of the suit premises for a period of fourteen years approximately at the time when it was inducted in the suit premises.

                *                           *                      *

  1. In view of afore-noted authoritative pronouncement of law laid down by Supreme Court in Ram Kumar’s case (supra), the answer to the question posed above is: tenancy of immovable property for any purpose other than agricultural or manufacturing created by an unregistered instrument would be deemed to be ‘month to month’ tenancy even where the tenant has paid annual/yearly rent to the landlord.

  2. As a necessary corollary thereof, the tenancy of Defendant 1 in suit premises is deemed to be ‘month to month’ tenancy which could be terminated by giving 15 days’ notice. (We again note here that Defendant 1 has admitted the receipt of legal notice dated May 03, 2010 issued by the plaintiff terminating the tenancy of Defendant 1).” 

13. The Supreme Court in Park Street Properties (Pvt.) Ltd. v. Dipak Kumar Singh[12], held as under:

“9. A perusal of Section 106 of the Act makes it clear that it creates a deemed monthly tenancy in those cases where there is no express contract to the contrary, which is terminable at a notice period of 15 days. The section also lays down the requirements of a valid notice to terminate the tenancy, such as that it must be in writing, signed by the person sending it and be duly delivered.

11. It is also a well-settled position of law that in the absence of a registered instrument, the courts are not precluded from determining the factum of tenancy from the other evidence on record as well as the conduct of the parties…” 

14. The High Court of Delhi in  Sanjay Gupta v. Krishna Hospitality[13] , observed as under:

“11. Per Section 107 of the Transfer of Property Act, 1882, a lease of immovable property for any term exceeding one year can be made only by a registered instrument and all other leases may be made either by registered instrument executed by the lessor and lessee or by oral agreement accompanied with delivery of possession. The defendants in their written statement have pleaded lease agreement dated 23rd November, 2015, for a period of three years, executed by plaintiff and defendants and where under claim to be entitled to occupy premises till 31st October, 2018. The same is not registered and is admitted to be not registered. The same thus, under Section 49 of Registration Act, 1908, cannot be received in evidence of any transaction effecting such property. Per Section 106 of Transfer of Property Act, in the absence of registered lease deed, a lease of immovable property for any purpose other than agricultural or marketing, is deemed to be a lease from month to month, terminable by a fifteen days’ notice…”

15. The principle was reiterated by the Supreme Court in Sevoke Properties Ltd. v. West Bengal State Electricity Distribution Company Ltd.[14],  when it observed as under:

“13. In terms of the provisions of Section 107, a lease of immovable property for a term exceeding one year can only be made by a registered instrument.  Admittedly, in the present case, the indenture of lease has not been registered. In consequence, the contents of the indenture would be inadmissible in evidence for the purpose of determining the terms of the contract between the parties. This is the plain consequence of the provisions of Sections 17 and 49 of the Registration Act, 1908. The only purpose for which the lease can be looked at is for assessing the nature and character of the possession of the respondent.”

 Renewal v. Extension of lease

16. An instrument of lease may contain a provision to the effect that on the expiry of the term of the lease, it is to be renewed or extended. Such a provision may not ipso facto renew or extend the term of the lease but it entitles the lessee to obtain a new lease in his favour after the expiry of the original term. The Supreme Court in its judgment in Hindustan Petroleum Corporation Ltd.   Dolly Das[15], observed as under:

“12…Covenant for renewal is not treated as part of terms prescribing the period of lease but only entitles a lessee to obtain a fresh lease…”

 17. Renewal and extension of lease are two different concepts. They are not defined in TPA. As per Webster dictionary, ‘to renew’ means ‘to make like new’or ‘to restore to existence’; and ‘to extend’ means ‘to stretch out to fullest length’.

18. The distinction between these two concepts has often been a subject of discussion and has been considered by the Supreme Court in its judgment titled as Provash Chandra Dalui. v. Biswanath Banerjee[16] , while observing as under:

“14. It is pertinent to note that the word used is ‘extension’ and not ‘renewal’. To extend means to enlarge, expand, lengthen, prolong, to carry out further than its original limit. Extension, according to Black’s Law Dictionary, means enlargement of the main body; addition to something smaller than that to which it is attached; to lengthen or prolong. Thus extension ordinarily implies the continued existence of something to be extended. The distinction between ‘extension’ and ‘renewal’ is chiefly that in the case of renewal, a new lease is required, while in the case of extension the same lease continues in force during additional period by the performance of the stipulated act.”

19. The distinction between the said two concepts was reiterated by the Supreme Court in the judgment of State of U.P.   Lalji Tandon[17], in the following words:

“13….There is a difference between an extension of lease in accordance with the covenant in that regard contained in the principal lease and renewal of lease, again in accordance with the covenant for renewal contained in the original lease. In the case of extension it is not necessary to have a fresh deed of lease executed; as the extension of lease for the term agreed upon shall be a necessary consequence of the clause for extension..”

 20. This distinction was reiterated by the High Court of Delhi in  Aggarwal and Modi Enterprises (Cinema Project) Pvt. Ltd.   New Delhi Municipal Council[18].

21. Reiterating the distinction between the two concepts, as enunciated in Provash Chandra Dalui and Lalji Tandon (supra), the Supreme Court in its judgment titled as Hardesh Ores Pvt. Ltd. v. Hede and Company[19],  observed as under:

“25. Having regard to these decisions we must hold that in order to give effect to the renewal of a lease, a document has to be executed evidencing the renewal of the agreement or lease, as the case may be, and there is no concept of automatic renewal of lease by mere exercise of option by the lessee. It is, therefore, not possible to accept the submission urged on behalf of the appellants-plaintiffs that by mere exercise of option claiming renewal, the lease stood renewed automatically and there was no need for executing a document evidencing renewal of the lease.”

 22. The High Court of Calcutta in the judgment of Renuka Seal  Sabitri Dey[20]  has made distinction between the concepts of renewal and extension of lease in the following words:

 “24…”To extend” means to enlarge, expand, lengthen, prolong to carry out further than its original limit. In other words, “extension” means enlargement of the main body; addition of something smaller than that to which it is attached; to lengthen or prolong. Thus, extension ordinarily implies the continued existence of something to be extended. But “renewal of lease” means creation of a new lease which creates a fresh right and obligation between the contracting parties. Thus, once a renewed lease comes within the scope of Section 107 of the Transfer of Property Act, such a lease can be made only by registered instrument…

32…when renewal is effected by a bilateral process on fresh terms and conditions to be settled between the parties after the expiry of the original lease period, it creates a new lease creating fresh relationship between the parties and under such circumstances it requires registration of a deed for renewal of lease.

33. The extension of lease, however, can be made through an unilateral process,inasmuch as, such extension is made on the option of one of the parties to the lease, as the party on the other part had and/or has no option but to accept the option for renewal exercised by the said party and to extend the said lease as per the provisions contained in the original registered lease deed.”

 23. It is thus clear that a clause in the instrument of lease either for renewal or for extension of lease is its important term and therefore, it has to be clear and specific, so as to enable the Court to ascertain the same. In case of uncertainty or ambiguity in the terms and conditions of the lease, whether there is an option clause for renewal or extension of lease, has to be determined reading all other covenants of lease as also the other evidence on record, so as to determine the intention of the parties.

Procedure of Renewal

24. The renewal of a lease is a privilege and the same is required to be done within the time limited and in the stipulated manner as provided in the lease for the said purpose. In the celebrity case of Caltex (India) Ltd. v. Bhagwan Devi Marodia[21], the Supreme Court held as under:

“4. At common law stipulations as to time in a contract giving an option for renewal of a lease of land were considered to be of the essence of the contract even if they were not expressed to be so and were construed as conditions precedent. Equity followed the common law rule in respect of such contracts and did not regard the stipulation as to time as not of the essence of the bargain. As stated in Halsbury’s Laws of England, 3rd Edn., Vol. 3, Art. 281, p. 165 : “An option for the renewal of a lease, or for the purchase or re-purchase of property, must in all cases be exercised strictly within the time limited for the purpose, otherwise it will lapse.” This passage was quoted with approval by Danckwerts L. J. in Hare v. Nicoll[22]. A similar statement of law is to be found in Foa’s General Law of Landlord and Tenant, 8th Edn., Article 453, p. 310, and in Hill and Redman’s Law of Landlord and Tenant, 14th Edn., p. 54. The reason is that a renewal of a lease is a privilege and if the tenant wishes to claim the privilege he must do so strictly within the time limited for the purpose.

  1. With regard to equitable relief against the failure of the tenant to give notice of renewal within the stipulated time, the law is accurately stated in Halsbury’s Laws of England, 3rd Edn., Vol. 23, p. 626, Article 1329, footnote (u) thus :”Relief will not be given in equity against failure to give notice in time, save under special circumstances. The decided cases show that in such cases relief is not given in equity save upon the ground of unavoidable accident, fraud, surprise, ignorance not wilful or inequitable conduct on the part of the lessor precluding him from refusing to give the renewal. The limits of the equitable interference in such cases were clearly stated by the Master of the Rolls (Sir R. P. Arden) in Eaton v. Lyon[23] . He observed:

“At law a covenant must be strictly and literally performed; in equity it must be really and substantially performed according to the true intent and meaning of the parties so far as circumstances will admit; but if unavoidable accident, if by fraud, by surprise or ignorance not wilful, parties may have been prevented from executing it literally, a Court of Equity, will interfere; and upon compensation being made, the party having done everything in his power, and being prevented by means, I have alluded to, will give relief … I decide this case upon the principles on which, Lord Thurlow decided (Bayley v. The Corporation of Leominster 1792, 1 Ves. 476), and I hope now, it will be known, that it is expected, these covenants shall be literally performed where it can be done; and that equity will interpose, and go beyond the stipulations of the covenant at law, only where a literal performance has been prevented by the means, 1 have mentioned, and no injury is done to the lessor.”

6. We are of the opinion that the stipulation as to time in Clause 3(c) of the indenture of lease dated February 17, 1954 should be regarded as of the essence of the contract. The appellant not having exercised the option of renewal within the time limited by the clause is not entitled to a renewal.”

25. This principle was reiterated by the Delhi High Court in its judgments titled as Frankfinn Aviation Services Pvt. Ltd. v. B.C. Gupta[24]; Punchip Associates P. Ltd. S. Rajdev Singh[25]; Jagdish Gupta v. The State Trading Corporation of India Ltd.[26]; and MGR Holding (P) Ltd. v Loil Overseas Foods Ltd.[27].

26. It, therefore, follows that if the original registered lease deed contained an option clause for renewal, it has to be exercised strictly in accordance with the terms thereof, to be followed by execution and registration of a fresh lease deed in accordance with Section 107 of TPA, failing which the lessee cannot claim renewal of the lease or to continue in possession of the premises as a lawful lessee. The lessee continuing in possession without actual renewal only becomes a tenant holding over under a month to month tenancy, determinable by a notice in accordance with Section 106 of TPA.


*Advocate and a qualified Chartered Accountant. Author is currently a Senior Associate in Dispute Resolution Practice at L&L Partners Law Offices, New Delhi. Author’s views are personal.

[1] Transfer of Property Act, 1882

[2] Registration Act, 1908

[3] 1906 SCC OnLine Cal 83

[4] 1952 SCR 269

[5] 1906 SCC OnLine Cal 83

[6] 1933 SCC OnLine Pat 55

[7] 20 IC 715

[8] 17 CLJ 167

[9] 1906 SCC OnLine Cal 83

[10] 1916 SCC OnLine Cal 39

[11] 2015 SCC OnLine Del 14507 

[12] (2016) 9 SCC 268

[13] 2018 SCC OnLine Del 8942

[14] 2019 SCC OnLine SC 592

[15] (1999) 4 SCC 450

[16] 1989 Supp (1) SCC 487

[17] (2004) 1 SCC 1

[18] 2005 SCC OnLine Del 898

[19] (2007) 5 SCC 614 

[20] 2007 SCC OnLine Cal 501

[21] (1969) 2 SCR 238

[22] [1966] 2 QB 130 

[23] 3 Ves. Jun. 690:30 E.R. 122

[24] 2007 (9) AD (Delhi) 449

[25] 2011 SCC OnLine Del 131 

[26] 2012 SCC OnLine Del 3315 

[27] 2015 SCC OnLine Del 11953

Saket Court
Case BriefsCOVID 19District Court

District Court, Saket, Delhi: Raj Kumar Chauhan, J., directed “Miniso” to pay the rent arrears for the lockdown and post lockdown period stating that the company has no dearth of money as the company has been operating almost 10 similar premises on rent in Delhi successfully.

Lease

Allegations placed by the petitioners are that they had leased their property to respondent i.e. Miniso Life Style Private Limited.

Monthly Rent

Monthly rent of the leased out property was Rs 9,75,000/- plus GST per month and the same was to be paid in equal proportions to lessor 1, 2 and 3 as per the agreement signed between the parties.

Head of Business Development of Miniso i.e. respondent asked the petitioner to consider the waiver of rent for the time period of lockdown — April, 2020 to May, 2020.

Further, the petitioner informed the respondent that as per clause 12 of the agreement i.e. Force Majeure Clause was not applicable to the existing circumstances and respondent cannot take unjust and wrongful benefit of said clause.

Though the petitioners agreed to waive the penal interest on the delayed payment @18% p.a. but the respondent continued to threaten for creating third party interest in the demised premises.

Petitioners were represented by Counsels Gaganmeet Singh Sachdeva, Sumit Thakur and Counsel for the respondent was Akash Tyagi.

Legal Notice

Petitioners had to in view of the above circumstances send a legal notice for recovery of rent and arrears on 23-05-2020.

Later the respondent sent a proposal of paying 70% of the arrears of rent for the month of April and 90% of the rent for June and July, 2020.

Petitioners in good­faith and trust sent the invoices of the rent for the above stated months and requested the respondent to pay the payment after deducting 15% rebate for arrears of rent for April, May, alongwith rent of June and July.

Despite sharing the invoice the respondent did not clear the arrears of rent and stopped taking calls from the petitioners.

In view of the above circumstances, the present petition was filed.

Respondents contention was with regard to the maintainability of the petitions stating that Clause 12 of the Lease Deed provides eventualities wherein in case the demised Premises is, whether fully or partially, destroyed or damaged by any Act of God, such as by flood, earthquake, storm etc. save and except fire, becomes unfit for occupation or use, the rent payable by the respondent shall be suspended till such time as the Demised Premises is once again rendered fit for use and occupation by the respondent.

Counsel for the Petitioners relied upon the decision in, Sona Corporation India (P) Ltd. v. Ingram Micro India (P) Ltd., O.M.P (COMM.) 249/2018 and Ramanand v. Dr Girish Soni, R. C. Rev. No. 447 of 2017.

The above two cases were cited with respect to the contentions that Court under Section 9 of the Arbitration Act can direct the payment of rent due as well as future rent in the same manner as the Court can grant in a civil suit under Order 39 Rule 10 CPC.

Adding to the above, the latter case was relied upon to rebut the respondent’s claim for waiver of rent.

Decision

Bench on perusal of the referred provisions and sections of Arbitration Act and CPC held that the respondents are directed to pay admitted rent to the petitioner for the period which has not been paid for the leased premises alongwith future payment also be paid as per the lease deed.

Further, adding to its analysis of the facts, Court stated that on perusal of the force majeure clause in the agreement, it can be stated that the lessee is entitled to suspension of the rent only if the property has been damaged or destroyed by any force Majeure event.

Admittedly, the property in question has not been damaged/destroyed in force majeure event.

Hence, in view of the law laid down by Delhi High Court in the decision of Sona Corporation India (P) Ltd. v. Ingram Micro India (P) Ltd., O.M.P(COMM.) 249/2018 and Ramanand v. Dr Girish Soni, R. C. Rev. No. 447 of 2017, Court concluded its decision stating that,

“mere temporary non-use of the tenanted premises by the respondent and yet being in power and possession of the premises in view of the temporary lockdown due to the COVID-19 Pandemic, the said event cannot be covered under the force Majeure clause of the lease agreement.”

Therefore, the respondent cannot claim waiver of rent.

Hence the Court is empowered under Section 9 of the Arbitration Act to order payment of arrears of rent for the lockdown period and also post lockdown period.

In view of the above terms, petitions were disposed off. [Uma Sharma v. Miniso Life Style (P) Ltd., 2020 SCC OnLine Del 979, decided on 06-08-2020]

Case BriefsCOVID 19High Courts

Delhi High Court: A Division Bench of D.N. Patel, CJ and Prateek Jalan, J., imposed costs on the petitioner while rejecting his petition to grant waiver of rent for all tenants and related reliefs.

In the present petition, following are the reliefs sought:

  1. Waiver of Rent for all the tenants
  2. Constitution of ‘Rent Resolution Commission’,
  3. Constitution of ‘Rent Auxiliary Fund’
  4. Issue directions to the Delhi Police to make amendments to the standard operating procedure where, if their Control Room officer receives any distress call on ‘100 or 112’ from a tenant or a landlord, as the case may be, the officer shall connect the caller, after receiving her consent, to ‘Rent Resolution Commission’
  5. One time amnesty to the landlords or tenants, and
  6. setting aside order dated 17th May, 2020 passed by respondent 1/UOI

Essence of the petition

Petition asks landlords to forgo consideration for their premises already retained by the tenant.

The powers/discretion for waiving of such consideration (rent) vests first with the landlords, who are contractually entitled to the same. This Court will be extremely slow in interfering with the contractual terms which have been entered into by the parties to the contract.

Court declined to entertain the prayer for waiver of the rent and added that,

It ought to be kept in mind that Court cannot do charity at the cost of others. Charity beyond law is an injustice to others.

If the landlord is entitled to receive the rent/consideration in accordance with law as per the contractual agreement entered between the parties concerned, then, the Court cannot, by a general order of the nature sought by the petitioner, waive such amount.

Rent Resolution Commission

In Court’s opinion it sees no reason to constitute ‘Rent Resolution Commission’ and provide for all the mechanism of appointment of the Members thereof, procedure for removal thereof, fixation of salary thereof etc.

Moreover such issues are policy oriented and not for the Court to decided as the same lies in the legislative/executive domain.

Further the Court added that, it cannot pass general directions that would result in waiver of contractual or property rights or establishment of adjudicatory bodies.

Fallacy in the Case

Petitioner seeking an order placing the burden of proof on the landlord with regard to the financial situation of the tenant is the fallacy in the matter.

Further, petitioner was unable to justify as to how a landlord can be asked to provide such evidence which may not be within his/ her knowledge at all. The petitioner has sought to postulate a scheme based upon his own understanding, but without sufficient thought as to the modalities or the consequences of the proposal.

One time amnesty to landlords or tenants

For grant of one time amnesty requires various factors to be considered and the same will be a policy decision to be taken by the Government authorities.

Court is not the maker of the law, and cannot draft a brand new law, except where the law is silent or where some lacuna is to be filled up.

Presumption

It has been presumed that the tenants alone are suffering from financial hardship or from the economic consequences of pandemic and lockdown, however, it ought to be kept in mind that even the landlords can be financially dependent on the rent.

Thus, whenever a landlord expects eviction of the premises on the basis of non-payment of the rent, in such eventuality, the Court has to appreciate the proved facts of that particular case.

Thus in view of the above the Court does not see any reason to interfere with the order dated 17th May, 2020 passed by UOI.

Concluding its analysis for the above matter, Court stated that the present petition does not appears to be a public interest litigation, but it is publicity interest litigation.

Proposals made by the petitioner are ill- conceived, as he does not appear to have thought about their practicability or their effect on other stakeholders.

Cost of Rs 10,000 have been imposed on the petition for abuse of process of the Court and the said amount will be utilized for COVID relief and welfare measures. [Gaurav Jain v. UOI, 2020 SCC OnLine Del 652 , decided on 15-06-2020]

COVID 19Hot Off The PressNews

Supreme Court: A bench of Ashok Bhushan and SK Kaul, JJ has dismissed a petition seeking directions to the Union of India for compliance with the Ministry of Home Affairs (MHA) order dated March 29, which directed landlords not to demand rent from students and migrant labourers for a period of one month amid the coronavirus-induced lockdown. The Court also warned the petitioner in-person advocate Pawan Prakash Pathak of heavy cost.

Justice Kaul said,

“The lawyers are filing a number of cases with respect to COVID-19, I don’t understand this,”

The petition had also sought a quick response be taken on the evictions being reported by tenants amid COVID-19 or till further orders of the government.

The MHA had earlier warned of strict action against those who force tenants to vacate their rented accommodation due to a failure to pay rent amid the ongoing crisis.

(Source: ANI)

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ranjan Gogoi, CJ and L. Nageswara Rao and Sanjiv Khanna, JJ has refused to hold  Section 13-B of the East Punjab Urban Rent Restriction Act, 1949 (Rent Act) merely because it grants a right to claim eviction for bona fide need by summary procedure to a certain group of landlords, that is, Non-Resident Indians subject to and on the satisfaction of statutory conditions which incorporate a check on frivolous evictions.

The Court said that the plea that Section 13-B ought to be struck down on the ground that similar rights can be extended to other landlords was without substance, as

“It rests with the legislature to make laws and extend it to other similarly situated persons. The rent act(s) invariably give similar rights by a controlled mechanism and alluded riders to various other classes/groups of landlords, namely, government servants, members of armed forces, the retired or soon to retire employees of the Central and the State Governments, widows, etc.”

The Court, further, explained that the right of Non-Resident Indians to initiate eviction under the summary procedure provided in Section 18-A of the Rent Act is not an unfettered and absolute right. It is subject to satisfaction of various pre-requisites and imperatives that ensure and check potential abuse by resorting to a short-circuit procedure. The requirement should arise from a genuine need of the Non-Resident Indian landlord or his dependent. Such landlord should be an owner for five years preceding the date of filing of the eviction petition. There is a cap on permitting the use of the provision which is available only once in a lifetime and only in respect of one building. There are restrictions and constraints on the re-sale and re-letting and a further requirement to possess the property for a continuous period of three months after the possession is taken.

It was, hence, noticed that the pre-conditions and post possession restrictions suggest that Section 13-B serves a specific policy objective to ensure the right of Non-Resident Indians to occupy their property in the Union Territory of Chandigarh and the State of Punjab as the case may be, after “returning” to their country. This right has to be balanced with the right of the tenants to establish their case on merits by disproving the genuine requirement of the Non-Resident Indians.

“Section 13-B cannot, therefore, be treated as an arbitrary classification that infringes and violates Article 14 of the Constitution.”

[Ram Krishan Grover v. Union of India, 2019 SCC OnLine SC 1469, decided on 14.11.2019]

Case BriefsHigh Courts

Karnataka High Court: S.G. Pandit, J. while disposing of this Civil Revision Petition filed under Section 115 of Civil Procedure Code set aside the order of the lower Court.

In the instant case, the application of the petitioner filed under Order 17 Rule 1 and 2 CPC was rejected by an order on 16.02.2019 for non-deposit of arrears of rent. Aggrieved by this, the petitioner had assailed this order.

The petitioner, a tenant filed R.A. No. 24 of 2015 against the Judgment and Decree of the Civil Judge and JMFC, Nagamangala. The application was for seeking fifteen days’ time for payment of arrears of rent/damages. But, it was rejected by the Trial Court on the ground that no undertaking was filed as to on which date it will be given and no bonafide was given. As a consequence of this, R.A. No. 24 of 2015 was also dismissed.

The petitioner deposited a sum of Rs 66,000 before this Court against the aforesaid payment of arrears of rent/damages.

N. Manjunatha, Counsel for the Respondent submitted that the above amount shall cover till the month of May 2019.

To this D.S. Hosmath, Counsel for the petitioner submitted that the remaining will be submitted before the Appellate Court.

The Court after analysing the facts and circumstances of the case observed that instead of rejecting the application outright, some reasonable time should have been granted. The Court also directed the appellate court to hear the appeal on merits.[Channappa v. M.R. Narayanashastry, 2019 SCC OnLine Kar 1836, decided on 17-09-2019]

Case BriefsForeign Courts

Supreme Court of Pakistan: The Three-Judge Bench of Mushir Alam, Faisal Arab and Ijaz ul Ahsan allowed an appeal filed by a landlord and directed the tenant to vacate premises for failure to pay rent in terms of the tenancy agreement.

Respondent herein was inducted as a tenant in the appellant’s premises at a fixed monthly rent. The tenancy agreement was for a period of eleven months, and clause 15 thereof stipulated that rent shall be increased by seven per cent after every eleven months. However, after the lapse of eleven months, respondent remitted rent which was less than the amount stipulated under the agreement. Appellant (landlord) demanded the same, and on refusal, by respondent, he filed an eviction application before the Controller of Rents, who ordered respondent-tenant’s eviction. Respondent filed an appeal before the learned High Court wherein the learned Single Judge held that Section 7(5) of the Cantonments Rent Restriction Act, 1963 prohibits increase in rent beyond what is determined under the tenancy agreement unless a period of three years has elapsed, therefore, no default in the payment of rent had been committed. Aggrieved thereby, the appellant-landlord filed the instant appeal.

The Court opined that the tenancy agreement provided that the rent of the premises shall be increased by seven per cent after every eleven months. Under the urban rent laws tenancy continues even after the expiry of the term provided under the tenancy agreement. Hence where the tenant continues to occupy the tenement after the expiry of the term mentioned in the agreement the covenants of the agreement continue to apply except such covenants that are in conflict with the provisions of the applicable rent law.

It was held that the periodical increase in rent agreed between the parties under the tenancy agreement must be regarded as the rent determined by an agreement between the landlord and the tenant within the meaning of Section 7(5) of the Act. Section 7(5) of the Act prohibits any unilateral increase in rent, which surprises the tenant, before the expiry of three years. An increase, which is not unilateral but with the consent of both the parties cannot be subsequently disputed by the tenant unless it is called in question through an application made for fixation of fair rent.

In view of the above, it was concluded that the respondent had failed to pay rent in terms of the tenancy agreement and thus the impugned judgment was set aside.[Abdul Latif v. Parmacie Plus, 2019 SCC OnLine Pak SC 4, Order dated  25-02- 2019]